EURUSD is poised to correct amid overheated conditions and profit-taking

The American dollar’s selloff has recently pushed the EURUSD pair to 1.20—a level last seen in 2021. Tuesday’s surge was triggered by Donald Trump’s comments regarding the fragile state of the national currency. The President surprised investors by stating that the greenback is “doing great.” The market saw it as a sign of approving the current decline, and a new wave of selling followed, propelling EURUSD higher. On Wednesday morning, traders began taking profits after the pair hit a local peak.

The dollar’s weakness stems from several factors. During the first year of Trump’s second term, USD lost about 9% of its value, marking its steepest fall since 2017. The administration’s unpredictable trade policy, persistent attacks on the Federal Reserve’s (Fed) independence, and soaring government spending have raised concerns over the markets.

The US central bank is widely expected to keep interest rates unchanged at the conclusion of today’s meeting. However, the outlook for 2026 suggests that borrowing costs could decline by about 50 basis points. It may be related to Jerome Powell’s replacement later this year. Trump is anticipated to announce his successor soon.

The technical picture paints a solid resistance level near 1.20800 after the pair’s recent surge. The price has since retreated, forming a bearish candlestick—a clear sign that bulls are losing their grip on the market. The Stochastic Indicator, with %K=73 and %D=70, is now approaching overbought territory and creating conditions for a corrective pullback. The Chaikin Oscillator remains positive, signaling ongoing accumulation, but it could falter if selling pressure intensifies.

Despite the high chances of a short-term decline, the fundamentals are still on the side of rising EURUSD. The dollar’s weakness appears structural and is likely to persist as long as the Trump administration maintains its current policy course. Consequently, any near-term pullbacks may be viewed as potential buying opportunities.

Pay attention to the following trading plan:

Buy EURUSD during a correction near the 1.19750 level. Place Take profit at 1.21300 and Stop loss at 1.18450.

This forecast is valid from January 28 till February 4, 2026.